Craig Carton's lawyers responded to the government's opposition to their call to dismiss securities fraud charges


Back in May, Craig Carton's attorneys filed a memo supporting a Motion to dismiss the indictment of securities fraud for failure to state an offense. It made one wonder, if the hedge fund was able to track all sales and financial info in real time how could Mr. Carton be accused of intending to defraud them? The government accused Craig of not having any tickets and never selling any -- the fact that his attorneys say that he can prove he sold thousands of tickets would disprove the heart of the government's case and accusations against Carton, no?

Last Friday Craig Carton's team responded to the government's opposition to those filings. Highlights follow.

I. FACTUAL BACKGROUND

Mr. Carton established a New York State licensed business acquiring bulk tickets to live events, including sporting events and concerts, that, in turn, would be resold on the secondary ticket market. Mr. Carton’s business sought investors and loans, including from the Hedge Fund. Prior to the agreement with the Hedge Fund on December 8, 2016, Mr. Carton first began discussions with the Hedge Fund in September 2016 regarding a potential investment in his ticket resale business. Over the course of the next few months, the Hedge Fund engaged in extensive due diligence regarding this opportunity, including receiving an extensive diligence analysis from one of the largest accounting firms in the world, Ernst & Young.

It was only after months of negotiations and vetting that on December 8, 2016, the Hedge Fund ultimately invested in Mr. Carton’s ticket business. Further, in compliance with the loan agreement requirements, Mr. Carton created a separate business in tandem with the Hedge Fund that would exclusively allocate the Hedge Fund’s investment.

In the following months, Mr. Carton acquired and resold thousands of tickets on the secondary market and fully complied with an audit of his business by a major accounting firm. All the while, the Hedge Fund was given complete access to independently review an online, third-party platform to check the corresponding ticket sales and financial results in real time which they acknowledged doing.

Leading up to the loan, Mr. Carton went to great lengths to fully inform the Hedge Fund on all aspects of this legitimate ticket business opportunity and then to ensure complete transparency and compliance with the agreement.

Here, the Government’s Indictment does not even allege that Mr. Carton never intended to honor the agreement. Again, the Government, in the instant case, suggests that conduct after the agreement was consummated should be used as a basis for inferring intent at the time of the agreement, and, thus, the Court should let stand Count Three of the Indictment. Gov’t Br. 20-21. That is a flawed argument and poses an insurmountable legal problem for the Government. The Government has not and will never be able to plead contemporaneous fraudulent intent on the part of Mr. Carton at the time of the agreement with the Hedge Fund.

We wrote last month, "...without intent...there cannot be fraud."

The next scheduled day in court is July 19th for the judge's decision on motions and an overall status conference.

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